Real Estate Wholesaling: The Acquisition Process
In order for us to actual assign or double close on a property, we must first put it under contract for the RIGHT price. Placing a property under contract at the right price, will allow you to make a generous wholesale fee and allow your end buyer to make money on his exit. As real estate wholesalers, we want to create win/win situations for all parties involved. If we are supplying product to investors, where in the end, they end up losing money, you will not create an atmosphere of repeat buyers and happy customers. To ensure that we are contracting at the right price, there is a specific process that we work through to ensure that our numbers are accurate and our purchase price reflects the margin we need to make our desired profit.
The Real Estate Wholesaling Acquisition Process
The acquisition process within our business begins after the motivated seller has been qualified and appointment has been sent. This is the handoff point between our assistants who answer our calls and qualify sellers to our acquisition managers who go on the appointments. When qualifying the sellers who reach out for our services, our assistants gather all of the vital information on the phone from the seller to determine if an appointment should be set or not. Once the appointment is set, our Acquisition Manager will be able to review all of the vital information on the sellers file within our CRM. To make this simple, we will lay out the step by step process after an appointment is set by our assistants.
1) Appointment is added to Acquisition Manager's schedule.
2) Acquisition Manager reviews all pertinent information on the file to confirm appointment is necessary.
3) Acquisition Manager will call the seller lead, the day before or the morning of the appointment to confirm that someone will be available to show the property.
4) Depending on the status of the current lead (motivation, likely hood of a deal, price point, etc) the Acquisition Manager will bring a sales folder consisting of different information to leave with the seller.
- Purchase Contract
- Property Disclosures
- Information Packet on the Business
- Business Brochure
- BBB Information
- Business Card
This information is left with the seller because even if we are unable to come to an agreement, they will now always have a way to get in touch with us and details on our business.
5) Acquisition Manager goes on the appointment, during this appointment he will want to accomplish a few things.
- Build a relationship with the seller. Building trust and a level of comfort with them.
- Take photos and a video of the property. This information will be used for marketing the contract and also further analysis on the condition of the property.
6) Acquisition Manager will leave the sales folder behind with the seller and let them know that they should expect an offer within 48 hours. Acquisition Manager should also confirm how the sellers want the offer delivered (email, in person, mail)
7) Our Acquisition Managers have a specific day of the week that they time block to submit offers. This allows them to better coordinate there schedules and ensure all offer's get out. If it is a very hot deal, the Acquisition Manager will submit the offer that day or in person with the seller.
8) As previously stated, in order for us to contract these properties at the right price, we must run an analysis on the property to ensure that we contract the property at a price point we know one of our buyers will purchase at and still allow them to make money on their exit.
9) With the help of the pictures and video taken on the walk through, the Acquisition Manager will now run an analysis on the property.
10) Within our business, we have developed specific analysis tools to help us derive at a maximum purchase price in streamlined fashion. On our end, we should know, based on the product which exit strategy will be most likely used (rental or fix n flip) for the specific product that we are offering on. This will help us run our numbers. A rule of thumb is that investors who are looking to hold the product will typically pay more than fix and flippers.
11) The Acquisition Manager will work through the analysis process focusing on accurate numbers for the following areas.
- After Repair Value - In our business this number is derived through the real estate broker we work with. In our CRM, we click a button when we are looking for the ARV and sends the information to our broker to get back to us with an ARV. This number is typically derived once the appointment is set.
- Estimated Repair Costs - This is the step of the analysis process where the photos and video or vital. Estimating repair costs is the area where most investors fail because they under estimate the repairs costs, which results offering to much money for the property. If you have not rehabbed properties yourself, it is very difficult to accurately determine repair costs for a property. We always suggest to over estimate repair costs if you are just starting off.
- Purchase Closing Costs - These are the costs associated with acquiring the property, such as: Abstract updates, survey updates, attorney fees, recording fees, transfer taxes and origination fees. These costs will differ based on the buyers source of financing and the deal you have with the seller.
- Sale Closing Costs (if flipping) - These are costs associated with selling the property, such as: Abstract & survey fees, attorney fees and transfer taxes.
- Holding Costs - These are the costs associated with holding the property throughout the life of the project, such as: Property taxes, Utility payments, Insurance and lender monthly interest.
- Projected Profit - This is the not profit for the wholesale fee, but the profit for the investor with intentions of fixing and flipping the property.
- Wholesale Fee - This is the fee that you expect from the deal
Once you take into account all of these costs based on the ARV, you will come up with a Maximum Purchase Price. This is more of a detailed analysis to derive at your purchase price. There are other rules of thumbs that you can use to get to this figure much quicker.
12) Once the maximum purchase price is derived, the Acquisition Manager is going to want to prepare his offer for the property. In our business, we will make an offer based on the competition and motivation on the deal. If there is high motivation and low competition on the deal, we will typically set an anchor offer at 75% of the maximum purchase price. This scale will slide to 100% of the maximum purchase price if there is high competition and low motivation on the deal.
13) The Acquisition Manager, will then prepare the contract and send the offer to the seller based on how he wanted to receive it.
14) Once the purchase contract is delivered, the Acquisition Manager will contact the seller and let them know that the offer has been delivered.
15) The Acquisition Manager is also responsible for any negotiations from the seller once the contract is received.
16) Once the negotiations are completed and the contract is signed. The Acquisition Manager will receive the signed contract and hand off the file to Dispatch Manager.
The real estate wholesaling acquisition process is a very important set in the wholesaling game. It is very important to have good systems in place to receive appointments, build relationships, analyse properties and deliver contracts. The more streamlined this process is, the more properties you will be able to evaluate in return the more contracts you will get out the door and the more revenue you will produce. Always be looking to make minor adjustments to you acquisition process to streamline the activity and get more properties under contract. We hope that this post helped you discover the step by step process of acquisitions for real estate wholesalers.